How much is the home you want to buy really worth? The answer to that question is a matter of opinion; several of them, in fact! But it’s the homeowner’s opinion that determines the initial listing price.
And because homeowners often have an emotional attachment to the property, it can be easy for them minimize the flaws, while extolling the merits.
Of course, most home sellers get pricing guidance from their listing agents. A comparative market analysis (CMA) is used to illustrate recent sale prices of similar homes, and to project a price range. Yet a CMA is only as good as the agent expertise and data quality behind it.
The CMA is a recommendation only. The home seller picks the price! The seller might stick within the CMA’s price range, or shoot for the moon.
Sometimes, a seller will attempt to “price in” near-term upticks in market value, in order to scoop up more coins from the closing table. This tactic is most common in the spring, during the peak of the market, as sellers, and their listing agents, anticipate month-over-month gains in spring and summer home prices.
The optimism can backfire, as we discussed in a prior blog post, “What home buyers need to know about appraisals.”
A 2016 study by Quicken Loans examined home appraisal data against home sales prices throughout the country. Economists found that home sellers, on a national average, over-estimated their home value by 2%. In some regional markets, the difference was 3% to 5%.
When the appraisal puts a bucket of cold water on a home price, the home buyer still has recourse, as we explained in a previous blog post. The protection of an Exclusive Buyer Agent is absolutely essential to avoid over-paying for a home!
Another advantage of using an Exclusive Buyer Agent, is the ability to have professional representation while looking at any home in the market, including homes For-Sale-By-Owner and homes for sale directly by builders.
Because these sales occur outside of the Multiple Listing Service, they are not counted in typical market comparisons. Nor are they counted in home price and home sale statistics touted by the media. This is another example why home prices are subjective.
Ultimately, a home’s market value is what a buyer is willing to pay for it! With the guidance of your Exclusive Buyer Agent, you can be sure of having the objective, professional advice you need to make wise home buying decisions.